When the zero curve is decreasing, which of the followings is true? a) The two-year zero rate, R(0, 2), is equal to the one-year zero rate, R(0, 1) b) The forward rate between year one and year two, i.e. Fo (1, 2), is lower than the one-year zero rate, R (0, 1) c) The forward rate between year one and year two, i.e. Fo (1,2), is between the one-year zero rate, R (0, 1), and the two-year zero rate, R (0, 2). That is R (0, 1) < Fo (1,2) < R (0,2). d) The forward rate between year one and year two, i.e. Fo (1,2), is lower than the two-year zero rate R (0, 2) e) Two of the above answers are true f) None of the above

When the zero curve is decreasing, which of the followings is true? a) The two-year zero rate, R(0, 2), is equal to the one-year zero rate, R(0, 1) b) The forward rate between year one and year two, i.e. Fo (1, 2), is lower than the one-year zero rate, R (0, 1) c) The forward rate between year one and year two, i.e. Fo (1,2), is between the one-year zero rate, R (0, 1), and the two-year zero rate, R (0, 2). That is R (0, 1) < Fo (1,2) < R (0,2). d) The forward rate between year one and year two, i.e. Fo (1,2), is lower than the two-year zero rate R (0, 2) e) Two of the above answers are true f) None of the above

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose the current forward curve for one-year rates is the following: Time Period Forward Rate f(0,1) 2.5% f(1,1) 3.6% f(2,1) 4.5% f(3,1) 5.1% Calculate the spot rates for 2-year, 3-years and 4-year spot rates Calculate the forward rates f(1, 2), f(1, 3), and f(2, 2) 3) Use the information to value a 4-year bond that pays 4.5% annual coupons.
Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 0.3%, E(2r 1) = 1.3%, E(3r1) = 8.9%, E(4r1) = 9.25% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities.
3a) What is the forward rate? What is the relationship between forward rates and the spot rates? Provide the equation assuming annually compounded rates over two years.
Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows:1R1 = 2.78%, E(2r1) = 4.10%, E(3r1) = 4.60%, E(4r1) = 6.10%Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year Current (Long-Term) Rates 1 _____.__% 2 _____.__% 3 _____.__% 4 _____.__%
Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively), are as follows: 1R1 = 0.5%, E(2r 1) = 1.5%, E(3r1) = 7.2%, E(471) = 7.55% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your percentage answers to 3 decimal places. (e.g., 32.161)) Answer is complete but not entirely correct. Current (Long-Term) One-year Two-year Three-year Four-year Rates 0.500 % 0.990 % 3.025 % 4.863%
Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows:1R1 = 2.62%, E(2r1) = 3.90%, E(3r1) = 4.40%, E(4r1) = 5.90%Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows:1R1 = 2.62%, E(2r1) = 3.90%, E(3r1) = 4.40%, E(4r1) = 5.90%Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities
1.) What is the rate annually that will produce the same amount of interest per year is called? 2.) Its the total amount to be paid or received after a given period of time? 3.) What do you call the number of conversion that take place in a year 4.) What do you call the time interval between succeeding interest calculations?
Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows:1R1 = 2.50%, E(2r1) = 3.75%, E(3r1) = 4.25%, E(4r1) = 5.75% Using the unbiased expectations theory, calculate the current (long-term) rates for 1-, 2-, 3-, and 4-year-maturity Treasury securities
Please compute Payback Period, Net Present Value (NPV) and Internal Rate of Return (IRR). For Payback Period, provide your answer to the nearest two decimal places (X.XX) -- do not write 'years' or 'yrs' please. For NPV, please indicate the whole dollar value with proper commas -- do not use dollar signs. For IRR, list the percentage to the nearest two places (X.XX%) and include the percent sign. Thank you for the help!
Consider the following table for an eight-year period: \table[[Year,T-bill return,Inflation],[1,7.48%,8.52% Solve for C. And D. only. -- a. and b. are taken care of
Suppose that the current one-year rate (one- year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1=6%, E(2r1) =7%, E(3r1) =7.5% E(4r1)=7.85% 1 Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. Show your answers in percentage form to 3 decimal places.

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